Recent research to identify significant factors that influence feeder cattle prices has focused on cattle and market characteristics. The research reported here used data from Georgia teleauctions during the 1977 to 1988 pe¡ to determine the possible impact of seller's reputation on price. Both significant premium and discount seUers were identified for two of the three teleauction organizers. Theteleauctionorganization that transferred the least amount of information about the cattle had the greatest number of reputation sellers while the organization with the most information about sellers' cattle given to buyers registered no significant seller reputations. Reputations can help buyers estimate quality in the absence of complete information.Most research identifying significant factors influencing feeder cattle prices has focused on cattle and market characteristics (Buccola, 1980(Buccola, , 1982Schroeder et al.;Lambert et al.;Turner et al.;Bailey et al.). These studies have investigated price determination in traditional, telephone, and video auctions and explained much of the variation in feeder cattle price. Little research has focused on reputation trading. Shapiro explored price premiums as returns to reputations where, nThe idea of reputation makes sense only in an imperfect information world" (Shapiro p. 659). On the other hand, Sporleder used experimental economic methods to investigate the effect of buyer's reputation on exchange prices.The purpose here is to extend research on feeder cattle price determination to include the possible impact of seller's reputation on price. This research is an empirical integration of feeder cattle price determination and reputation trading research. Many of the factors hypothesized to influence feeder cattle prices in Turner et al. are also used here.
Three Georgia feeder cattle teleauction markets were analyzed from 1977 to 1988 to estimate the impacts of cattle characteristics and market conditions on prices. Cattle characteristic price impacts were similar to those in previous studies. The impact of feeder cattle futures price on teleauction price was positive but varied across markets. Optimal lot size ranged from 143 to 276 head. In one market, 14 lots were necessary to generate positive price impacts. Additional buyers were estimated to have a $.30/cwt per buyer impact on price.
Use of debt in financing agricultural firms is an issue of perennial interest. Much of this interest reflects farmers’ disastrous experience with debt during the Great Depression. The foreclosed mortgages and bankruptcies of that era reaffirmed an historical feeling that achieving a level of zero debt or financial leverage was a high priority goal. E. G. Johnson, who was Chief of the Economic and Credit Research Division of the Farm Credit Administration, articulated the position in the 1940 Yearbook of Agriculture that this goal is even more important than increasing profits: “It may be well to emphasize again that while credit properly used may help farmers to increase their income and raise their standard of living, the fact must not be overlooked that more credit will not cure all the ills of agriculture. The greatest need is to assist the farmers in getting out of debt, not deeper into it,” [6, p. 754]. As memories of the Great Depression faded, agricultural economists tended to emphasize the effect of debt on farm size and therefore net income.
In many parts of the U.S., beef cattle production is a large sector of the agricultural economy, yet few of the cattle are stockered; instead the production is focused on cow-calf operations only. Restricting their Operation to only the first phase of beef production may be limiting the cattle owners’ profit potential. This paper examines the opportunities for Operators to earn additional profit from stockering cattle. Using a representative risk-averse producer, a decision set with seven possible marketing strategies is evaluated for the optimal decision in a Bayesian framework which allows for price and production risk. We find that in many instances retaining the cattle for stockering is a superior decision when done in conjunction with specific hedging strategies utilizing options and futures contracts.
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